Updated: Sep 1, 2018
Just Start!! I know that sounds so simple, doesn't it? In reality, though it can be very difficult to take the first steps and to stick with it over your lifetime. Telling you to just start sounds ridiculous but sometimes that's all it takes, you just have to make the commitment to improve your financial future and just start! We are talking about something very important here, we are talking about your financial future.
What kind of financial future will you have? Will you live paycheck to paycheck for the rest of your life? What kind of retirement will you have? Will you be forced to work well into your old age (if you can find a job) because social security will not be enough to cover your basic needs? Who knows if it will even exist when you get to retirement age.
Will you have a comfortable financial future? A future where you will have achieved financial freedom. A future where you are free to make lifestyle choices as you wish and not because you are forced to due to debt or lack of savings. A future wherein retirement you can choose whether to work or not. Some people like to stay busy and enjoy some sort of work while others would rather travel and relax. If you start planning now for your financial future you will be free to make that choice for yourself.
All you need to do is make the decision to start now!
As a first step, I would track your spending the best you can for at least a couple of weeks. Be sure to include the small impulse purchases that you make, at the time they don't seem like much but over a long period of time they do add up. I would then review your spending habits to identify any wasted spending. Once you know where there is wasted spending you can change your spending habits and funnel that money into your savings. Now I am not saying that you shouldn't ever spend any money on yourself. If all you do is save, save, save and not enjoy some of your money along the way you most likely won't stick with it. The idea here is to create a budget that you can comfortably stick to for a long period of time.
To help me keep track of my spending I have created an Excel spreadsheet. The spreadsheet has multiple pages with each page representing a different year. Within each page, I then list all of my bills for each of the twelve months. For me setting it up monthly seems to work best but something like this could also be set up weekly. This spreadsheet has become a very important tool for me to use as I track my spending though out the year. I can go back at any time and easily compare my spending from one month to the next. I have also used it to track my utility bills throughout the year.
Another thing you should do is treat your saving just like you are paying another bill and pay yourself first. The best way I have found to do it is to list myself (savings) among all of my other bills on my spreadsheet. By doing this each month I know that that money is already "spent" and not part of my disposable income. I would suggest setting up automated saving deductions from your checking account into your savings or money market accounts. This has worked out the best for me because I don't have to remember to do it every week.
If you work for an employer who offers a 401K plan I would advise enrolling into it as soon as possible especially if it includes an employer match. This is basically free money that is being offered to you by your employer. The other benefit to a 401K is that it is pre-tax money coming out of your paycheck so you never see it. I like it because I am putting away money into my 401K every week but because it is automatically deducted from my paycheck I don't miss it.
The sooner you start saving the better off you will be, I can never repeat that enough. Ideally, you will start saving for retirement as soon as you begin your working life. The sooner you start the longer you will have to let compounding work in your favor. It's never too late to start saving for your retirement, you just have to start!